"Caution is needed when comparing the costs and benefits of making energy efficiency improvements, given the significant variation seen across location, age and type of property"
- Dan Clinton - The Mortgage Works
Buy-to-let landlords in the North of England are seeing the greatest financial returns from energy-efficient properties, with the region recording the highest price and rental premiums in the country, according to new research from The Mortgage Works.
With proposed minimum energy efficiency standards (MEES) set to require all rental properties to meet EPC band C from 2030, the findings shed light on where the financial case for upgrading is strongest, and where costs are likely to outweigh the benefits.
"Decarbonising and adapting the UK's housing stock remains critical if the UK is to meet its net zero target by 2050, especially given that emissions from residential buildings account for 15% of the country's greenhouse gas emissions," said Dan Clinton, head of buy-to-let at The Mortgage Works.
"Government policy requiring landlords to improve the energy efficiency of their properties forms part of these efforts. Current proposals for the minimum energy efficiency standards (MEES) will require all rental properties to meet EPC band C from 2030 (subject to a cost cap and some specific exemptions)."
Over half of private rented stock now rated A to C
Progress across the sector has been considerable. Clinton noted that the English Housing Survey shows 51% of private rented housing stock is currently rated A to C, up from 25% ten years ago.
"Part of the improvement is due to newly built properties, which tend to have a much higher energy efficiency rating (around 97% are rated C or above)."
Regional variation remains marked, however. "London has the most energy-efficient properties, with around 65% rated C or above," he explained. "Meanwhile, East Midlands and Yorkshire and The Humber have the least efficient properties, with just over a third rated C or above."
Much of this divergence reflects the age and mix of housing. London's higher concentration of flats plays a significant role, as flats tend to perform better on energy-efficiency measures than other property types. Within the private rented sector (PRS), 6% of flats are rated A or B, with a further 53% rated C. Detached properties are the least energy-efficient in the PRS, with 18% rated E or worse, though they account for just 6% of the overall PRS stock.
Price premiums rising for buy-to-let landlords
The Mortgage Works updated its analysis of how buy-to-let property prices respond to energy performance ratings, controlling for factors including bedroom count, location and whether the property is newly built.
"Our latest figures suggest that a property rated A or B attracts a significant premium of 12.2%, compared to a similar property rated 'D'," Clinton said. "This is higher than our 2024 research, which showed a 10.9% premium. C-rated properties attract a 3.7% premium, while there continues to be a slight discount for E-rated properties (1.7%)."
The North of England stands out clearly. "Echoing the trends seen in our 2024 research, the North of England sees the highest premium for an A or B-rated property (19.1%), whilst this remains lower in London (6.9%) and the South of England (9.4%)."
Buy-to-let investors also respond more strongly to energy ratings than owner-occupiers. An A or B-rated home purchased for owner-occupation attracts only a 1.6% premium, well below the 12.2% seen in the buy-to-let market.
Rental premiums follow a similar pattern
The rental market tells a comparable story. An A or B-rated property currently attracts an 8.1% rental premium compared to a similar D-rated property, up from 7.0% in the 2024 research. Based on a typical English rent of £1,075 per month, that translates to around £85 more per month. C-rated properties attract a modest 1.8% uplift (around £20 per month), while E-rated properties see a 1.7% discount.
"There remains considerable regional variation in rental premia, although this pattern has changed somewhat since our 2024 research," Clinton added. "Our latest data suggests that the North of England now sees the highest rental premia, with an A or B-rated property commanding a 13% higher monthly rent. As shown earlier, the North also sees the highest property price premia for more energy efficient properties."
The South of England, by contrast, sees a more limited impact. "The South of England continues to see a more modest impact on rents from energy efficiency, with an A/B-rated property attracting a 5% premium," he noted.
Upgrade costs vary sharply by age and property type
The cost of reaching EPC band C differs considerably depending on when and how a property was built. Government data shows the average cost to upgrade a pre-1919 property to band C is around £10,700, and these older homes make up nearly a third of the PRS. A property built between 2003 and 2013, currently rated D to G, costs just £2,500 on average to bring up to standard.
Terraced houses, which account for a third of England's PRS, face average upgrade costs of around £7,900. Detached houses also sit at the higher end, while purpose-built flats, which make up close to 30% of the PRS, require far less investment, given that very few are currently rated E or below.
Regionally, the West Midlands and South West carry the highest average upgrade costs, while the North East tends to sit at the lower end.
Where does the investment pay off?
Clinton urged careful interpretation of the cost-benefit picture. "Caution is needed when comparing the costs and benefits of making energy efficiency improvements, given the significant variation seen across location, age and type of property," he said. "Nevertheless, by comparing the average costs of improvement with the impact on house prices and rents, we can draw some broad conclusions."
The case is strongest in the Midlands and North, where price uplifts represent a meaningful share of the initial outlay.
"Combined with higher potential rents, the majority of landlords in these regions are likely to recoup the initial investment within five years (though clearly the full financial benefits would only be realised upon the sale of the property, which may also include additional costs, such as capital gains)."
Elsewhere, the arithmetic is less favourable. The data shows no rental uplift in the South of England from moving a property from D to C, making it unlikely that benefits will outweigh costs on average. London offers some rental benefits, but limited price uplifts mean costs will often exceed returns.
Compliance is a further consideration regardless of region. Landlords who breach MEES regulations face fines of up to £30,000 per breach, per property, a factor Clinton said must be weighed carefully as the 2030 deadline approaches.
